February/March 2010 / Features
Enhancing Business Relationships Through Budgeting and Forecasting
For “cost center” functions like law departments, budgets and forecasts are among the most effective ways to connect corporate and department strategy to case management tactics. Advances in business intelligence tools, matter management and electronic invoicing systems place those capabilities within reach of any legal department. The current generation of budgeting and forecasting tools is also designed to take advantage of advances in predictive analytics, which in turn help practitioners think through case strategies and alternative engagement models. Budgets are cost projections at the individual-matter level. Forecasts are cost projections at a group-matter level. Forecasts are best applied to groups of like matters, however defined (e.g., by practice area, case type, law firm).
Budgeting and forecasting are most effective when they are tailored to the idiosyncrasies of the business. The authors pose a number of questions law departments should consider. Answers vary depending upon such factors as the strategic purposes for deploying the cost projection, corporate culture, business-partner demands and limitations in data and budgeting tools. Before implementing solutions it is essential to clearly test the implementation, management and reporting processes. Setting budgets requires acting on assumptions and then using logic to predict cost.
